Lear All Set for Bankruptcy?

Shares of Lear Corp. (LEA) slumped more than 30% on Friday after reports claimed that the auto parts maker was expected to file for bankruptcy as early as June 30.

The Southfield, Michigan-based company must make a $38 million interest payment on two of its bonds by Tuesday or agree with lenders to restructure its debt. Lear has been trying to negotiate a deal with creditors for months now and is reportedly prepared to file for Chapter 11 bankruptcy protection if talks fail next week.

Citing people familiar with the matter, the Wall Street Journal said that Lear has $500 million in debtor-in-possession financing with its lenders, including JPMorgan Chase & Co. (JPM - Analyst Report) and Citigroup Inc. (C - Analyst Report).

Auto parts suppliers have been teetering on the brink of collapse since a large number of their customers have succumbed to the credit crisis. After the Obama administration rejected a request for additional bailout funds to suppliers, a number of these companies might have to head for bankruptcy courts. Lear’s progress in that direction now almost looks certain to industry insiders.

Shares of the company were trading down nearly 28% to 39 cents at noon. In the last one year, the stock has traded between 27 cents and $18.31.